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Case studies

Case studies

Our initial discussions with our clients often start with their pension needs based on their historic pension arrangements. John Coldwell’s specialist pension qualifications (CII – G60, AF3, R08 and K10) together with FCA Permissions allow JCPI to help most of our clients with their pension needs and concerns. To the layman, pensions can be difficult to understand and the consequences of making the wrong decision can be costly and irrevocable.

Advice is also provided on our clients’ non-pension investment needs including life and protection cover for businesses and families and strategies to minimise the impact of IHT on death.

The following cases studies are all real life cases;

Pensions

Mr L aged 53 a personal pension client with an interest in simplifying his pension arrangements;

Unusually Mr L had 13 different pension policies which he had acquired over his working life (we normally find that our clients may have 2 or 3 different pension arrangements 13 is a bit extreme but the same considerations apply); he did not know the value of his accumulated pension saving; how it was invested, what his pension investment options were, whether he had any guaranteed or safeguarded benefits OR what the costs and charges of his pension savings were.

Our evaluation concluded that his pension saving was significantly higher than he had thought, that the level of investment risk that applied was unnecessarily high taking account of his attitude to investment risk, and that the costs of investing were more than we would typically expect based on a modern style contract. We established that no guarantees or safeguarded benefits applied to the existing arrangements.

Our recommendation was that all 13 plans should be consolidated in a modern style plan with clean share pricing with access to 3,000+ collective investment funds. Our investment recommendation suggested that he should invest in 10 different collective investment funds with a view to achieving risk adjusted returns over the medium to long term.

SIPP Client with interest in commercial property

Mr S aged 49 with a preserved pension entitlement in a Final Salary/Defined Benefit pension scheme with a major UK employer.

He had recently established his own limited company to pursue a business interest in engineering; he wanted to use the transfer value offered in respect of his preserved pension entitlement under the final salary/defined benefit pension scheme of his former employer to fund commercial property purchase. The property he was interested in buying was in need of renovation and refurbishment.

Rather than paying commercial rent to a commercial landlord Mr S wanted to use the transfer value offered by the scheme trustees/his former employer to buy a commercial property with his limited company paying commercial rent to his SIPP for his own benefit as opposed to an unconnected third party (this could have applied equally to a SSAS).

The transfer value offered was generous resulting in a very low critical yield.

Mr S was also interested in his pension fund providing flexible death benefits as opposed to a fixed spouse’s pension.

Mr M aged 66 client retirement options

Mr M had 3 different retirement arrangements.

One plan had guaranteed/safeguarded benefits but the overall value of his pension saving meant that these were not that important to him. His interest was to consolidate all plans into one to simplify his arrangements overall; to take 25% of his accumulated pension funds as tax free cash and then take regular monthly income of 5% of the remaining fund as taxable income at a time of his choosing (he was to continue to receive income from consultancy for a 2-3 year period). He intended to use his pension fund throughout his lifetime ensuring that on his death (provided he was survived by his wife) that the funds would be re-allocated to Mrs M and that on second death the funds had the potential to pass to their child and in turn their grandchildren

Mr & Mrs C – Investment of capital and review of existing ISAs’

Mr C had retired early and taken his guaranteed pension benefits from his former employer’s pension scheme from age 60; Mrs C had also taken her public sector pension benefits early.

Advice had been provided to Mr C on his pension options his preferred option was the guaranteed pension offered by his former employers defined benefit pension scheme. His view was that he did not feel that it was possible to replicate this level of guaranteed pension income should it be deemed suitable for him to transfer out of the DB pension scheme.

In respect of the tax free cash (paid to Mr C) and their and their existing cash deposits investment advice was provided to

(1) invest cash held outside of ISA format for tax favoured capital growth within a cautious to moderate risk profile viewed over the medium to long term with the option of taking additional income at any point when and if required

(2) maximise ISA investment within the current tax year based on their stated objectives and

(3) review their existing cash based ISA investment with a view to potentially achieving an investment return greater than could be achieved from cash deposits.

Mr & Mrs K – arranging affairs to minimise the effects of IHT

Mr and Mrs K had substantial cash deposits and holdings in stocks and shares ISAs’ as well as other collective investment arrangements.

The focus of our advice was to ensure that their financial affairs were arranged in such a way as to minimise the effects of inheritance tax that would apply on second death without compromising their income or capital needs during their lifetime.